Where a claimant obtains from a court a final judgment and order in its favour, it will be unusual for that judgment creditor/claimant beneficiary of the judgment, to later seek an order, setting that judgment and order aside. Though undoubtedly rare, such a situation arose in Madison CF (UK (t/a 118118 Money) v Various  EWHC 2786 (‘Madison’), where Hildyard J (sitting as a County Court Judge) was faced with determining whether to accede to an application by a money lender to set aside 371 county court judgments (judgment in defaults and judgment on admissions) made in its favour.
Far from being straightforward, the case raised ‘a number of curiously difficult points’ (paragraph 2) and ‘points of some novelty and curiosity’ (paragraph 6). The case dealt with the impact of delay on applications to set aside judgments in default by judgment creditors, and whether CPR r.3.1(7) granted a coordinate Court jurisdiction to set aside judgment on admissions final orders.
The Original Claims
Pursuant to loan agreements regulated by the Consumer Credit Act 1974 (the ‘CCA’), a money lender had made loans to various individuals, who then failed to comply with their repayment obligations. Claims were made and judgments obtained against the individuals.
However, at all material times, including the time when the judgments were entered, the loan agreements had, respectively, been unenforceable under CCA, as a result of 3 main defects.Consequentially, the judgments in purported enforcement of those loan agreements were judgments that should never have been obtained.
Application to Set Aside
The defects were not incurable, but the judgment creditor applicant (the 'Applicant') elected not to seek a curative court order, or to rely on subsequent curative actions (provision of documents and information), to remedy the defects. After discovering the defects, the Applicant had, in effect, made a decision to abandon the judgments and any potentially valid underlying claims against the individuals involved. As Hildyard J noted, at paragraph 13, the Applicant’s:
‘…objective is closure and to have the judgments it has obtained set aside; it is prepared to take the obvious commercial hit of loan agreements which, once the judgments go, can no longer be enforced.’
In short, the Applicant did not want to be‘…thought to be enforcing that which it is not lawful to enforce…’ (paragraph 28). Such an application, certainly narrowlyadverse to the Applicant’s own interests, was noted as unusual; it was an ‘exceptional feature’ (paragraph 4) that the Applicant positively asserted that:
‘…the entry of judgment amounted to invalid enforcement because of the breaches of or defects in compliance with the CCA itself’ (paragraph 4).
It was also noted that the judgment debtor respondents would benefit from acceding to the application.
In considering the application, the issue that concerned Hildyard J was whether he:
‘…had jurisdiction to set aside the judgments which have been made which in each case finally determined the matters in issue. That is to say they are not interlocutory but final orders.’ (paragraph 22)
On this, the judge distinguished between the two varieties of judgments:
- judgments in default (336 judgments); and
- judgments obtained on admissions (35 judgments).
Judgment in Default
As to judgment in default, Hildyard J saw no real difficulty with the Court’s jurisdiction to accede to the application, save for the issue of delay:
‘This is because CPR 13.3(1)(b) makes particular provision as regards judgments entered in default which though final have always been treated as administrative in nature based on non-appearance or non-acknowledgment or filing of defence and as requiring no judicial input.’
Under the CPR r.13.3 provisions, there was good reason to set aside the judgments in default. Hildyard J said, at paragraph 25:
‘The fact that there is good reason why the judgment should be set aside or varied is inherent in the matters which I have already sought to outline. In short, the judgments should not have been obtained because the agreements were, in the circumstances I have described, unenforceable.’
However, CPR r.13.3(2) required the Court to consider, when determining the application, whether the application had been made promptly. On the facts, there had been very significant delays, which the Applicant candidly acknowledged meant the Applicant had not been prompt. The imperative to apply had emerged 2 years prior, during the course of 2016 and the reasons thereafter for delay were diverse, but in no case compelling. At paragraph 59, Hildyard J said 'I do consider that two years' delay is inexcusable...'. As part of this, there had been delay despite Hildyard J indicating 7 months earlierthat there needed to be a formal application made to the court in order to resolve the issue.
Hildyard J said, at paragraph 28:
‘…whilst the requirement of promptness is readily understandable and certainly one of importance in the usual context of the defendant seeking to set aside a judgment, it seems to me that in the exceptional circumstances here, where, to the contrary, the claimant and beneficiary of the judgment wishes for it to be set aside and considers it necessary to do so lest it be thought to be enforcing that which it is not lawful to enforce, some different factors must be taken into account. The principal of which is that if delay were to defeat the exercise of the power that would be to the detriment of all parties and not merely one of them. In short, I consider there to be no difficulty in assuming jurisdiction in respect of the Default Judgments obtained and as a matter of discretion, notwithstanding the delay, I consider it plain that I should exercise that jurisdiction by reference to the factors I have described.’
In essence therefore, Hildyard J found that, while usually on (judgment debtor) applications, promptness was important, the exceptional circumstances in Madison of the Applicant wishing and considering it necessary that the orders to be set aside, raised different factors to be taken into account. One factor being that if delay were to defeat the application, that would cause detriment to all sides. Jurisdiction did exist, and the discretion ought to be exercised in favour of granting the application. At paragraph 59, Hildyard J said '...I do not think that the delay, though I disapprove of it, should stop me making the order.'
Judgments on Admissions
When approaching jurisdiction to set aside judgments obtained on admissions, Hildyard J stressed two points. The first is familiar, that it was the exceptional that a judgment creditor was applying to have the orders set aside. The second point was that the judgments were generated by administrative rather than judicial process. Hildyard J made these two points, at paragraph 29:
‘I should preface my remarks by stressing not only the curiosity or exceptional nature of this matter in that it is the claimant beneficiary of the judgments which is seeking to set them aside; Bbt (sic) also …that in no case was any of the matters referred to a judge of any nature. All the judgments on admissions were obtained, as it were, in bulk as an administrative matter without a hearing and without any judicial input at all. I make that point because it seems to me that it does colour the appropriate approach of the court.’
On the general proposition, Hildyard J was clear that the Court had jurisdiction to set aside its own order. The question was whether the jurisdiction extended to final orders, and as to the constraints on discretion.
As to the Court’s power to set aside its own order, Hildyard J accepted the submission that, apart from any inherent or general jurisdiction the Court might have, CPR 3.1(7) conferred jurisdiction to set aside an order. That provision states as follows:
‘A power of the court under these Rules to make an order includes a power to vary or revoke the order.’
However, two issues of significance arose, the first as to the constraint that the public interest in finality of orders puts on the exercise of that power, and secondly, whether final orders fall into a separate category outside the scope of CPR r.3.1(7). At paragraphs 31 and 32, Hildyard J put these two issues as follows:
‘The first is that a sequence of cases has emphasised strongly that whilst the court may have jurisdiction its discretion should be treated as limited by reason of the overriding public interest in finality.
The second issue springs from the same source, that is to say the interest of finality, but it is whether the word "order" in the particular provision, 3.1(7), extends to a final order probably more accurately referred to as a judgment.’ [bold added]
On this second point, it was noted that this was a ‘vexed question’ (paragraph 39) and a ‘knotty problem’ (paragraph 34), which had ‘…never been definitively decided’ (paragraph 33).
When considering what authorities there were, Hildyard J first referred to Briggs J in Kojima v HSBC Bank plc  EWHC 611 (Ch), where Briggs J had declined to set aside a judgment on admissions, on the ground that the interest in finality precluded that, save possibly Briggs J accepted in what were described as truly exceptional circumstances (adopting Peter Smith J’s phraseology in Independent Trustee Services Ltd v GP Noble Trustees Ltd & Anor  EWCA Civ 195). Put shortly, where an order was in the nature of a final order it should stand unless the principle of finality be undermined.
Hildyard J then turned to Tibbles v SIG plc  1 WLR 2591 (‘Tibbles’), where he summarizedat paragraph 37, the jurisprudence in respect to non-final/interlocutoryorders, discerned from Rix LJ’s judgment in Tibbles:
‘…where the relevant order is not a final order the court nevertheless will have jurisdiction but its use is to be very closely constrained so that there is in reality very little difference between a jurisdictional and discretional line. In other words, it will be difficult even in the context of an order which is not final to reopen a matter otherwise than on appeal. That concerns, as I say, interlocutory orders.’
However Rix LJ did not go on to give guidance as to final orders, as the issue did not arise in the appeal.
Hildyard J then considered the judgment of HHJ Paul Matthew, sitting as a judge of the High Court, in Prompt Motors Ltd v HSBC Bank plc  EWHC 1487 (Ch), who at paragraphs 30 to 31, said:
‘In my judgment, the effect of these authorities is clear. Cases of final judgment or orders, including those made on admissions, by default, by consent or, indeed, on summary judgment application, are different from interlocutory or case management orders. In the latter class of case, rule 3.1(7) can be exercised by the court in cases of decision on a false basis or where there has been a material change in circumstances.
In the former class of case, including the present one, the bar is deliberately placed higher, in order to satisfy the increased public interest in achieving a final result to litigation.
I accept that even a final judgment obtained by fraud can be set aside. But, as at present advised, I doubt whether anything less will do. Nor do I consider that a final judgment can be set aside merely because fresh evidence comes to light or, worse, evidence that was available at the time that the final judgment was given but which was not deployed is now put forward for the first time. A party has the obligation to fight a case, and the whole case, on one occasion, and cannot deal with it in stages as and when convenient; cf Henderson v Henderson (1843) 3 Hare 100’
As Hildyard J said, at paragraph 41:
‘It does appear therefore that HHJ Paul Matthews's view, sitting as a High Court judge, that whilst a final judgment obtained by fraud could be set aside, nothing else will do and the implication, though there is no actual finding or holding to this effect, is further doubt as to the application of 3.1(7) at all.’
Against this, it was noted that less strict approaches were indicated in Sir Keith Barron MP and Anr v Cave and Vines  EWHC 605 (QB), and Oakley Smith v QBE Insurance (Europe) Ltd  EWHC 3172 (Ch),
From these authorities, Hildyard J discerned at paragraph 44 that, though the jurisdiction granted by CPR r.3.1(7) to revoke/set aside final orders was undecided:
‘…the trend of authorities is to prefer the view either that it does not or that the jurisdiction is so constrained as, in effect, unlikely to be exercised except of course in the context of fraud or such like. That has caused me at the very least pause for thought.’
However, Hildyard J repeated that the issue was still open, and that ‘order’ and ‘judgment’ in other areas of the CPR in the context of final orders were ‘…used interchangeably if not quite randomly in various instances.’ (paragraph 45).
Resolving the issue, Hildyard J held, at paragraph 46:
‘I consider…that the power of the court does extend under CPR 3.1(7) to a final order and thus to a judgment even if conclusive of the proceedings. Put another way, I regard the jurisdiction of the court as available, though as when the matter comes to discretion, it will be the truly exceptional case where it might be exercised.’
Judgment on Admissions – Application to Facts
Having determined the existence and scope of the Court’s jurisdiction under CPR r.3.1(7) to revoke/set aside a judgment on admissions final order, Hildyard J went on to applying the facts to the law. At paragraphs 47 and 51, Hildyard J said:
‘…the question…is as to whether … all these 35 cases are such exceptional cases as to justify the exercise of this jurisdiction. As it seems to me, this is a truly exceptional case. I …regard as an important factor that none of these cases went before a judge or anyone sitting lieu of a judge: they were dealt with administratively in block. The public interest in finality is plainly still applicable but is attenuated by the fact that no substantive court resources have been devoted to the entry of the judgments in question.
Secondly, the other unusual factor…is that the applicant/claimant wishes to set aside the judgment rather than the defendant doing so, not to confound but to give effect and more proper effect in fairness to the customers of the provisions. It seems to me that such circumstances tell very considerably in favour of, as it were, overriding the public interest in finality in the interests of ensuring that the CCA is not finessed or confounded by the side wind of an unintentional misrepresentation to the court of the true rights of the claimant in every case.
...Here no ... collateral advantage is sought, it is all the other way. The benefits, in other words, would inure to the persons against whom judgment has been entered.
If the court declines to grant the application sought so that the judgments remain in place, those [judgment debtors] will suffer not only the indignity, but also the commercial disadvantage, of there being on the record against them judgments for not paying their due debts. In circumstances where the law in fact precluded entry of such judgment, it is wrong for them to be subject to that very black mark, as the applicant not only concedes but asserts.
Given that I am told that the FCA entirely approve of what is proposed, I consider that in this most exceptional of cases I should make the orders for setting aside of the judgments obtained on admissions. I stress that it is only by reference to these extremely exceptional circumstances that I am prepared to take this most unusual step.'
In essence therefore, Hildyard J found that Madison was ‘a truly exceptional case’ because:
- all the judgments on admissions were granted administratively in block (without substantive court resources being expended), rather than judicially,
- exceptionally, it was the judgment creditor applying to set aside;
- the Applicant did not make the application for a collateral advantage; the benefit from revoking/setting aside the judgment on admissions final orders would inure to the judgment debtors. Unless the judgments are revoked/set aside, the judgment debtors would, respectively, suffer indignity and commercial disadvantage - an unjustified black mark in their records for non-payment of the judgments;
- Financial Conduct Authority approved the proposal;
It was only because of 'these extremely exceptional circumstances' that the Court took the 'unusual step'' of revoking/setting aside all the judgments on admissions.
Madison makes clear that where a judgment creditor applies to set aside a judgment in default final order, different factors come into play as to the importance of delay under CPR r.13.3(2). Where both parties will suffer detriment if the judgment in default final order is not set aside, this will be a principal factor in favour of granting the set aside application, notwithstanding the application’s lack of promptness.
Where a judgment creditor applies to revoke/set aside a judgment on admissions final order, Madison is authority for the proposition that the Court does have jurisdiction, under CPR r.3.1(7), to accede to the application. Whether it ought to, as a matter of discretion, to accede to the application will depend, outside fraud, on whether the case is ‘truly exceptional’; in such circumstances, the Court ‘might’ exercise its discretion in favour of the applicant. As the result in Madison shows, factors such as exceptional judgment creditor applicant, benefit inuring to the judgment debtors and FCA approval, can lead to a Court detmininng that it should a set aside a judgment on admissions final order.
SIMON HILL © 2018
33 BEDFORD ROW
NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.
See paragraphs 15 to 21 of Hildyard J’s judgment in Madison CF (UK (t/a 118118 Money) v Various  EWHC 2786 on a High Court Judge sitting in the Rolls Building as a County Court Judge;
For those interested in the precise nature of the defects rendering the loan agreements unenforceable, these can be found in Hildyard J's judgment in Madison CF UK (Trading as 118118 Money) v Various  EWHC 2786 (Ch), at paragraphs 7 to 13:
‘Section 55(1) of the CCA as amended provides that prior to entry into a regulated credit agreement such as each of the loan agreements was, the customer is entitled to receive a document setting out the pre-contractual information prescribed by the Consumer Credit (Disclosure of Information) Regulation (SI 2010/1013) referred to as "the Disclosure Regulations". The information is called the Standard European Consumer Credit Information, often known as "the SECCI". The purpose of the SECCI is to enable customers to compare credit offerings across different providers by the provision of information in a standard format. If the information is not disclosed exactly in the manner prescribed, section 55(2) of the CCA provides that the loan agreement is only enforceable with a court order.
In such circumstances, that is to say, where there has been some departure from the highly prescriptive terms of the SECCI, the agreement is only enforceable if the court is persuaded exceptionally to enforce it. It is provided by section 127(1)(za) that on such an application for a court order the court is to dismiss the application unless it is satisfied in exceptional circumstances as to prejudice and a degree of culpability not being such as to warrant preventing enforcement.
It follows from the fact of an exception that the applicant could, under the provisions of section 127 and section 127(2) of the CCA, have applied to court to seek to override the presumption against dismissal of such an application. But in all the circumstances the applicant has determined that it should not do so, either now or in the future. Accordingly, absent a court order, the provisions of the CCA by reference to the failures to comply with SECCI, even if in some cases they were minor, render the agreements unenforceable, so that the judgments in purported enforcement of them are, as it were, judgments which should never have been obtained.
I have mentioned that there are two other issues under the CCA which would also be, subject to the provisos that I shall explain, such as to prevent enforcement. The second is section 77A of the CCA, which requires a creditor to send a debtor a statement setting out information in relation to the account covering a period of not more than one year in an annual statement, the contents of which are carefully prescribed. The applicant accepts that it failed to provide the correct information about the opening balance, and included statutory wording which had in point of fact been revoked, and that in the circumstances, in the case of each of the defendants in the proceedings, the statement did not comply with the information regulations and was not an annual statement accordingly.
That too would, subject to this caveat, render the agreement unenforceable but the caveat is that it would remain open to the applicant to serve compliant statements. Indeed, as I understand it, the applicant has served compliant documents such that it would not on that ground be prevented now from seeking a court order, though at the time that the court orders were entered it was in point of fact in breach.
The third matter under the CCA relates to subsequent notices of arrears. Where a customer fails to make monthly payments on time under loan agreements, section 86B of the CCA provides that when the amount of the arrears exceeds the sum of the last two payments, the creditor must serve the customer with a notice of the sum in arrears. Thereafter by section 86B(2) the creditor must serve the customer with a subsequent notice of sums in arrears called a SNOSIA at six monthly intervals for as long as the arrears persist. The contents of the SNOSIA is specified by the information regulations.
The applicant complied with the 86B obligation; but its SNOSIAs were defective in a number of instances. Although it has now served compliant SNOSIAs, at the time that it entered judgment it did so in circumstances where the SNOSIAs it had served were defective. This third issue then is like the second, in that it would be curable now. But counsel has confirmed that the applicant does not wish to bring further proceedings and that its objective is closure and to have the judgments it has obtained set aside; it is prepared to take the obvious commercial hit of loan agreements which, once the judgments go, can no longer be enforced.’
As will be apparent, the Applicant judgment creditor elected not to:
- seek a court order permitting enforcement notwithstanding the s.55(1) defect (i.e. effectively waiving the defect);
- rely upon the fact that compliant annual statements had later been provided, though not at the time judgment was entered; and
- rely upon the fact that compliant notice of sums in arrears (SNOSIA) had later been provided, though not at the time judgment was entered.
One can say ‘certainly narrowly’ contrary to the Applicant’s own commercial interest, because there may have been wider, reputational, regulatory and/or commercial reasons, why the judgment creditor Applicant might have wanted the judgments set aside and for the loan agreements to remain unenforceable. These were not gone into in the judgment, but later mention of the FCA involvement may hint at regulatory imperatives.
CPR r.13.3 reads as follows:
‘(1) In any other case, the court may set aside or vary a judgment entered under Part 12 if–
(a) the defendant has a real prospect of successfully defending the claim; or
(b) it appears to the court that there is some other good reason why–
(i) the judgment should be set aside or varied; or
(ii) the defendant should be allowed to defend the claim.
(2) In considering whether to set aside(GL) or vary a judgment entered under Part 12, the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly.’
Hildyard J said in Madison CF UK (t/a 118118 Money) v Various  EWHC 2786 (Ch), at paragraph 27:
‘In that context, [counsel for the judgment creditor Applicant] was admirably candid in effectively accepting that the requirement of promptness had not been satisfied and that for reasons diverse, but in no case compelling, the matter had been much delayed, including after I had indicated in February of this year the need to make a formal application in court.’
Hildyard J in Madison CF UK (t/a 118118 Money) v Various  EWHC 2786 (Ch), was clear as to the limitations to his summary of Rix LJ in Tibbles v SIG plc  1 WLR 2591. He said, at paragraphs 36 and 37:
‘I think I can summarise the effect of the jurisprudence as follows. Whilst not in any sense wishing to gloss, the conclusions set out at some length in the judgment of Rix LJ in that case at paragraph 39 where the learned lord justice sets out the conclusions which he considers can be drawn from the relevant jurisprudence including the Kojima case.
Put very shortly and subject to that further elaboration…’
These are usually referred to as interim orders, sometimes case management orders or non-final order. The term ‘Interlocutory’ is now old language.
At paragraph 39(i) of Tibbles v SIG plc  1 WLR 2591, Rix LJ said:
‘Whether that curtailment goes even further in the case of a final order does not arise in this appeal.’
Hildyard J repeated that the point, in this view, had been left open, at paragraph 46, where he said:
‘I do not consider thereby that I have to depart from any of the cases I have mentioned, including HHJ Paul Matthews's decision, since it seems to me that he did not decide that point and the Court of Appeal in Tibbles expressly left it open.’